Good day, ladies and gentlemen, and welcome to Honeywell's first quarter 2016 earnings conference call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mark Macaluso, Vice-President of Investor Relations.

Thanks, Cynthia. Good morning and welcome to Honeywell's first quarter 2016 earnings conference call. With me here today are Chairman and CEO, Dave Cote; and Senior Vice President and Chief Financial Officer, Tom Szlosek. This call and webcast, including any non-GAAP reconciliations are available on our website at www.honeywell.com/investor. Note that elements of this presentation contain forward-looking statements that are based on our best view of the world and of our businesses as we see them today. Those elements can change and we ask that you interpret them in that light. We identify the principal risks and uncertainties that affect our performance in our Form 10-K and other SEC filings. This morning we will review our financial results for the first quarter and share with you our guidance for the second quarter and full year of 2016. And finally, as always, we'll leave time for your questions at the end. So with that, I'll turn the call over to Chairman and CEO, Dave Cote. David M. Cote - Chairman & Chief Executive Officer: Good morning, everyone. As I'm you've seen by now, Honeywell delivered another strong quarter to kick off 2016. EPS of $1.53 increased 9%, coming in at the high end of our guidance range. Sales of $9.5 billion were up 1% on a core organic basis, above the high end of our sales guidance. We outperformed and saw growth accelerate in Aerospace, Commercial Aftermarket and Transportation Systems, in our residential and commercial and China businesses within ACS, and in Process Solutions and Fluorine Products in PMT. Excluding the dilutive impact of M&A, segment margin expanded 20 basis points in the quarter to 18.9%. We generated significant sustainable productivity in the quarter. The Honeywell user experience is driving new products at higher margins. Our factories and sourcing organizations continue…

Thanks, Tom. Cindy, if you could, please open the line up for questioning.

Certainly. Our first question is coming from Scott Davis from Barclays.

Hi. Good morning, guys. David M. Cote - Chairman & Chief Executive Officer: Hey, Scott.

Well, lots here, but I just wanted to get a sense, Dave, and I know you're going to hate this question, but what's the signaling, if there is any, of making Darius COO now? I'll just leave it at that. What are you telling us? Are you telling us you might be thinking about retirement and this is a transition, or are you telling us that you need this role, you need a COO-type role? David M. Cote - Chairman & Chief Executive Officer: I would say – what I'm saying is that I think Darius is a damn good guy and I don't want to lose him. If I didn't promote him, who knows where he'd have gone?

I wish my boss would say that. All right, I'll move on. I ask this question a lot because I don't get it. What happens with the UOP catalyst business when it goes down this much? Do you get a snap back? I looked back at history and I couldn't find any real trends. How long is it going to take to convert orders to revenues? Because it seems like your backlog is there. But do things snap back, or is this a multi-quarter kind of grind its way back? David M. Cote - Chairman & Chief Executive Officer: Let me address it a bit, and then I'll ask Darius, who used to run that business, to weigh in a bit here. It ends up being pretty lumpy, as you know, like a lot of the stuff in UOP. And we generally can tell what's going to happen because you don't get the order right away and ship it out like two weeks later, so you do have some idea. But it still ends up being pretty lumpy overall. And that's why we said that this first quarter was going to be tough for us on both growth and margins because we knew that was coming, and that was the case here. But that being said, we have a pretty good sense for the year and what happens in the second half versus this first half when it comes to catalysts, and that's what allows us to be able to be confident in what we're saying for the rest of the year. So, Darius, anything you want to add? Darius Adamczyk - President & Chief Operating Officer: I think that's right, Dave. What we saw in Q1 of 2015 was a very strong shipment quarter in terms of our catalyst portfolio. And even within that catalyst portfolio, there's variability and it was a very, I'll say, margin-accretive set of catalysts that we shipped back in Q1 2015. And in terms of being able to convert it, we can generally convert it relatively fast, certainly within a quarter or at most a quarter or two. So as Dave pointed out, it can be lumpy. We had a very strong Q1 2015 shipment and I would say at some very favorable margin rates, which we expect to get those orders back in the second half of the year. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: The other thing to keep in mind here is this is our downstream business. It's serving refineries and petrochemical plants. The demand for the output from those units is very strong, and a lot of our catalysts activity has to be scheduled with customer service intervals as well. So that comes into play. And overall, I think you're right, Scott. The backlog I think speaks for itself.

Okay, I'll pass it on. Thank you, guys. David M. Cote - Chairman & Chief Executive Officer: All right. Thanks.

And our next question comes from Steve Tusa from JPMorgan.

Hey, guys. Good morning. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Hi, Steve.

Congratulations, Darius. Darius Adamczyk - President & Chief Operating Officer: Thank you.

Just on the ACS margins, could you maybe just give us kind of a – definitely weaker than expected. I think you talked about the mix. Could you maybe just give us a little bit of more color on that bridge more precisely on what you were expecting, where it ultimately came in? And then maybe just give us a little bit of color on the one-time related deal stuff that kind of goes away either in the second quarter or over the course of the year. Because you didn't change your margin guidance for the year, and it just looks like a heck of a ramp to ultimately get there. David M. Cote - Chairman & Chief Executive Officer: I'll talk a little bit and then turn it over to Tom. In terms of the ramp, it's no different than what we were saying back at Investor Day or back in December because this is pretty much what we expected. It was down a little bit from what we thought on guidance largely because of the mix difference as you look at what happened in the Building Systems division, which after it felt like six or seven quarters of saying the orders are there, it's going to come; it finally did, which was nice. It was a good thing to see. So this is pretty much consistent with what we've been planning for all along. And as you take a look at second-half growth for the total company, it's, as I said, largely driven by the absence of negatives than it is by any big thing that we're counting on. So, Tom? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Just moving a little closer to details, Steve, the dilutive impact from margins was, from Elster…

Okay. And the S&PS thing being down, I mean, that should have been – that's kind of visible, right? I mean, that's something that you probably knew about earlier because it's a tough comp as opposed to a change in the business environment? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: No, I – we certainly knew about the U.S. Postal contract completion. But when you look at the...

So then what else? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: But it's a short-cycle business, and we go through indirect channels. And your visibility out on those is not much more than a few weeks, a couple weeks. David M. Cote - Chairman & Chief Executive Officer: So, what happened on that, to Tom's point, there were two drivers. One we knew and planned for, USPS. The second one was distributor inventory levels which declined in the quarter, and we expect will probably decline again in the second quarter before leveling out. And that one is one that we had not anticipated. It just kind of happened. But we think as – once that, as you know, that level gets to where they want it, then you get back to the growth – you get back to the end market growth again.

Is there something – is there an industry there that you're seeing? Is it something – it seems like a lot of the macro in inventory-related stuff has stabilized. Anything more specific than that? David M. Cote - Chairman & Chief Executive Officer: No, we don't think so from an end market perspective. It looks more like just distributors trying to be a little bit more cautious.

Okay. And then one last question, just on the below-the-line stuff. You mentioned you're keeping your share count guidance the same, but then you said you're raising it partly because of share count dynamics. Could you just maybe clarify below the line what's changed, whether it's pension, restructuring, share count, what has helped you on the guide? Because it doesn't seem like the core profit guidance has changed very much. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: No, that's right. I mean, the big changes are the spot rate method on the pension side, which as we said, we fully expect to offset that impact with additional restructuring. We have eight acquisitions that we're integrating, and when we start to carry out our cost synergy plans, we'll really need to lean on that restructuring funding. So that's the – those are the major movements. The raise to the guidance is a reflection of the strong first quarter as well as the share count that we mentioned.

Okay, thanks. David M. Cote - Chairman & Chief Executive Officer: Thanks, Steve.

And our next question comes from Steven Winoker from Bernstein. Steven Eric Winoker - Sanford C. Bernstein & Co. LLC: Thanks and good morning, all. David M. Cote - Chairman & Chief Executive Officer: Hey, Steve. Steven Eric Winoker - Sanford C. Bernstein & Co. LLC: Hey. Dave, I think a skeptic – maybe you look at some of the segment margins over time now and this quarter, for example, even ex-M&A, and say, look, after more than a decade of almost 1,000 basis points of segment margin expansion and well past prior peak in all cases that it's just getting harder and harder and bumpier for whatever reasons, mix, et cetera. What would you say, what are the one or two things that you'd point to say, no, that's wrong, very explainable as you just went through ACS and here is why that's wrong? David M. Cote - Chairman & Chief Executive Officer: An analyst skeptic? Isn't that an oxymoron? That's, that's.... Steven Eric Winoker - Sanford C. Bernstein & Co. LLC: We're paid to be skeptics, not cynics, Dave. David M. Cote - Chairman & Chief Executive Officer: First of all, we forecasted this was going to happen in the first quarter. And, yes, okay, we didn't beat it by 10 basis points, but we're certainly within the realm of reasonability. And if you take a look at the total years, quarters are a little more difficult, let's say, you have things move always perfectly smoothly, because you have things like UOP that just cause things not to be perfectly smooth. On a total year basis, there's – this is going to continue. And it's not so much where you're coming from and the 1,000 basis points, yeah, that's quite nice. But there's at least another 300 basis…

And our next question comes from Andrew Obin from Bank of America Merrill Lynch.

Yes, good morning. David M. Cote - Chairman & Chief Executive Officer: Hey, Andrew.

Just more a general question. A lot of conversations with investors about sort of global PMIs bottoming and bouncing off the bottom. What are you seeing? Is the world truly be accelerating as you look at your business? And when are we going to start seeing it in numbers? Thank you. David M. Cote - Chairman & Chief Executive Officer: I'm hopeful that there is a global economic rebound, but we're certainly not going to count on it. If there was any region that surprised me in this past quarter, it was Europe did a lot better than I expected. I don't know if this is just a one-time bounce or something that's going to stay consistent, but I was quite encouraged by seeing that. It was a nice surprise. I mean, we'll see how much that turns into something. But right now, we're going to stay with this whole idea that this is a slow growth global environment and it's just the smart way to plan. And you see that reflected in how we are forecasting the second quarter and how we're forecasting the total year. I just don't think there's any percentage right now on being bullish about it. If it happens, great. I think there's a greater chance it happens than there is that it doesn't. But that being said, I don't see any percentage in being bullish about it.

And just a follow-up question, the dollar has been going up for years. And at the end, a lot of companies, you included, set up the hedging structure. And as this dollar trade is unwinding; A, how are you thinking about hedging in outer years; and B, other than hedging a weaker dollar, how does it impact your strategy? David M. Cote - Chairman & Chief Executive Officer: It doesn't really impact our strategy all that much because we have never really changed the way we did it. We've always tried to match cost and revenue as best we can, so I want to be producing in the markets where I'm selling. And as a result of that, I think it's put us in a pretty good position where we don't get out of whack with any competitor because of a currency mismatch. When it comes to the translation question, that's a separate one. We might consider taking some exposure off the table this year and next as we contemplate what could happen, especially as you look at Brexit and the possibilities there. But by and large, I don't feel as negative as I did about currency as I did, say, a year or two ago.

Thank you very much.

And our next question comes from Jeffrey Sprague from Vertical Research Partners.

Thank you. Good morning, everyone. David M. Cote - Chairman & Chief Executive Officer: Hey, Jeff.

Hey. A couple, maybe actually one for Darius since he's on the line. I just seen this morning that Grace is buying BASF's Catalysts business today. I just wonder if you could speak whether that was on your radar screen and maybe more generally, do you see M&A opportunities in that space for UOP or kind of related assets in that area? David M. Cote - Chairman & Chief Executive Officer: Obviously as usual, we're not going to comment on specific targets. So quick learning from Dave. But obviously, the catalysts space is interesting to us. It's something that obviously is core to what UOP does, and I would just say that that's an area that, you know, it's something that we've been looking at both organically and if the right opportunity presents itself, it's probably something that we'd be open to as w00ell. But clearly a space that's of interest to us.

Great. And then, Tom, just on tax, Honeywell for years has had a very sophisticated tax planning effort, solving to 26.5% almost precisely year after year. Is there anything in what the Treasury said a couple weeks ago when they were aiming at inversions that spills over and increases the risk to your tax planning strategies? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: First of all, my tax director is going to be thrilled that you referred to him as sophisticated. That's going to be a new one. David M. Cote - Chairman & Chief Executive Officer: It's a first for him. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Just kidding. Of course, Jeff, we're not an inverted company, Jeff, as you know. But the new rules do apply to U.S. multinationals as well, and there are specific criteria that intercompany loans are required to meet in order to be treated as debt as opposed to equity. We're currently assessing all of our intercompany loans against these criteria. We'll likely be required to have more extensive documentation placed on our loans, and it may have an impact on our ability to pool our cash globally as well. We're currently assessing that. But otherwise, we're not expecting a material impact, including in our ability to do M&A and including in our foreign operations.

Thanks, and just one more quick one, if I could. We're all just trying to get all the I's dotted on margins, as you can see on this call. Just the OEM payments for the year, if you gave that previously, I don't recall. Could you share that with us just so we have that dialed in? Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Yes, it's a little bit over $200 million for the year.

Year on year, I think.

Right. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: Year on year, $200 million.

Great. Thank you, guys. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: You're welcome.

And our next question comes from Gautam Khanna from Cowen & Company. Gautam Khanna - Cowen & Co. LLC: Yes, thank you. I was wondering if you've seen any change in customer buying behavior in the ATR Aero aftermarket. we hear a lot about pooling of parts and part-outs. I'm wondering if you're seeing any of that because the numbers don't suggest it. David M. Cote - Chairman & Chief Executive Officer: Yes, those phenomena, both of those are real. And you're seeing the consolidation more in China, I'd say, than anyplace else. And the parting-out is real, and we referenced it ourselves in previous announcements. That being said, those are a couple of headwinds, but there are also tailwinds. And that's flight hours, for example, where people are continuing to fly and that's always good. And it more than offsets the impact from those other items. Gautam Khanna - Cowen & Co. LLC: And in China, your spares were up quite a bit. Is there any – what do you think is actually driving that? Is it a restock? What's going on there? David M. Cote - Chairman & Chief Executive Officer: I'd say it comes back to flight hours again. They fly a lot. And that's really – I've said many times the biggest Aerospace driver we have is flight hours. And it's not tied to OEM schedules or airline profitability or any of that generally. The long-term trend is going to be driven by flight hours. If they're flying, everything ends up working out. Whatever short-term disruptions or benefits, whatever you're seeing, over time flight hours ends up being the driver. Flight hours continue to climb, and that's a good phenomenon for us. Thomas A. Szlosek - Chief Financial Officer & Senior Vice President: I'd also add…

And our next question will come from Nigel Coe from Morgan Stanley. Nigel Coe - Morgan Stanley & Co. LLC: Thanks for running a bit late here as well. Darius, congratulations on the role, fantastic. Darius Adamczyk - President & Chief Operating Officer: Thank you. Nigel Coe - Morgan Stanley & Co. LLC: So we've spent a lot of time talking about catalysts, so I apologize for another question here, but it is a big swing between first half and second half. Typically, how much visibility do you have on catalyst bed reloads? Is it three months? Is it six months? And how much variability do you have once you have a job in the backlog? Typically, how much variability is there and the timing of that? I can't imagine it's much, but maybe just comment on that, please. David M. Cote - Chairman & Chief Executive Officer: It's a mixture. There's stuff that we know about a long time ahead because some customers place orders a long time ahead. Others don't. But, Darius, you'd know better than me. Darius Adamczyk - President & Chief Operating Officer: I think when it comes to the second part of your question, which is once it's in the backlog, we can produce it fairly quickly, typically within three months. So I think the cycle, the conversion cycle time from booking to revenue is relatively short. In terms of visibility as to when the orders come in, frankly the visibility isn't great. It's a bit of a random function. Tom referred to this earlier about one of the fundamental things that's going on; this is actually a pretty good time for refiners. So what we're seeing is that refiners are actually putting off their turnarounds, which they're going to have to occur at some…

And our next question comes from Andrew Kaplowitz from Citi.

Hey. Good morning, guys. David M. Cote - Chairman & Chief Executive Officer: Hi.

Dave, the TS business seemed to pick up in 2Q. Can you talk about the improvement a little bit more? How did commercial vehicles do in the quarter? Is it just easier comparisons there being in take/hold? And can you sustain the mid-single-digit growth that you're seeing going forward? David M. Cote - Chairman & Chief Executive Officer: Commercial is still tough on the TS side. What you're seeing more were the benefits of the wins in the passenger vehicle side.

Okay. That's easy. And then, Dave, just – I know the answer to this, but I'm going to ask it anyway. Can you talk about your organic growth guidance in 2Q? There's the 1% growth you had in 1Q. Is anything getting worse in the portfolio in Aero and ACS that leads to lower growth? Or is it just conservatism and you're not forecasting the BSD accelerated growth that you saw in the quarter? David M. Cote - Chairman & Chief Executive Officer: I would say it's more a case where we want to stay careful. So yeah, there's nothing that says there's a disaster coming in the second quarter or anything like that. We're just – we want to make sure that we stay conservative, and hopefully, the first quarter performance continues on organic growth, but we'd hate like hell to count on it and not have it happen. And I'd rather have it be the other way around.

Appreciate it. David M. Cote - Chairman & Chief Executive Officer: You're welcome.

And that is all the time that we have for today's question-and-answer session. Mr. Cote, at this time I will turn the conference back to you for any additional or closing remarks. David M. Cote - Chairman & Chief Executive Officer: We were quite pleased to outperform again this quarter, and what we accomplished on organic sales growth, beating our commitment and the productivity generated to offset the known headwinds gives us the confidence to raise the low end of our EPS guidance by $0.10. We're encouraged by what we're accomplishing this year and next. And of course, we all hope that you feel the same way. Thanks.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.